G'day Prospektor, yes I know the report says that, in their...

G'day Prospektor, yes I know the report says that, in their Valuation assessment they make the assumption that TNG "gives up" 60%. My knee jerk reaction to the report was 28c might be an outcome if we were to "give up" 90%. In other words, I am not overly impressed by their assessment.

Having said that, it is interesting to note their assumption with respect to the deal. That is, sell a majority interest in the project for $33m, then get free carried with the majority holder retrieving their capex loan before any divs flow. They (Breakaway) must have got that from somewhere...correct?

Something akin to that would not surprise me, subject to just how many financiers/funders/companies are vying for the position. If I were on the other side, that is the sort of thing I would be shooting for also.

I am not convinced the valuation methodology is correct, in that they have used a dcf analysis, which effectively counts for zero the capex. I think what they are saying is that if the project repays say $600m of capex from cashflow, then you should not count that as being worth anything to the owners of the project. Correct I suppose, if the project has a very limited life. But that is not the case. If they assessed on future maintainable earnings you would achieve a far higher valuation. This comes down to having a long life project (say > 20 years), which we think is the case, but that has not entirely been 100% proven....but everyone I talk to thinks that is the case! Hence, the limited assessment of the resource and mine life gives rise to a very conservative Valuation if you are going to completely ignore the period of capex payback.

One other interesting point is the presumption that any deal will incorporate the completion of the DFS. Again, we are going to have to cop it sweet with respect to the deal if we are not in a position to complete the DFS ourselves, or assess that a further capital raising is too dilutionary.
Clearly a deal is on the table which incorporates the completion of the DFS. It makes sense to me, and we have heard previously this is the likely scenario. Again the Funder is taking risk, so again they are going to want their pound of flesh.

I honestly believe if we do a decent deal and get this thing moving forward and fully funded, the assessment of Value will change pretty rapidly. I think there are excellent prospects for a major resource upgrade. In itself this will seriously upgrade Value. If there is a really strong Partner, then the market will understand that this upgrade is meaningful, as the mineability is real, rather than a "maybe one day".

On another note, I took particular interest in their statement, "..a potential option could be a spin out of the base metals projects into a new vehicle...our view is that the portfolio would make an attractive IPO package in the right market". You can bet your life the Board is thinking exactly that, and that will be a nice payday for us also.

Happy Days are coming. I can feel it. 28c would be nice given our current share price, but I think we are sitting on far greater value than that. I am certain the Board is working very hard to unlock that for us !!